Metrologic Announces Financial Results for the Second Quarter 2006

Revenue Increases 28.7% to Record $62.6 Million Confirms Guidance for Full Year 2006



BLACKWOOD, N.J., July 25  /PRNewswire-FirstCall/ -- Metrologic Instruments, Inc. (NASDAQ:MTLG) today announced financial results for the quarter ended June 30, 2006 with total revenue of $62.6 million and net income of $4.4 million or $0.19 per fully diluted share. Beginning January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payments. Excluding the effects of SFAS No. 123(R), which for the second quarter 2006 totaled approximately $0.7 million net of income taxes or $0.03 per fully diluted share, net income was $5.1 million or $0.22 per fully diluted share.

  Financial Results and Second Quarter Highlights

   --  Revenue for the second quarter of 2006 increased by 28.7% to a record
       $62.6 million as compared to $48.6 million in the second quarter of
       2005.  This is the highest quarterly revenue in the Company's
       history.

   --  For the quarter, gross margin was 40.3% versus 44.4% for the second
       quarter 2005. On a sequential basis, gross margin improved 0.7% as
       compared to the first quarter's gross margin of 39.6%. Gross margin
       for the second quarter 2006 was primarily impacted by continued sales
       to Tier 1 retailers, product mix, business segment mix, and royalty
       costs. Excluding the effects of SFAS No. 123(R), gross margin for the
       second quarter of 2006 would have been 40.7%, an increase of 0.4%.

   --  Operating expense as a percentage of revenue was 30.0% for the second
       quarter 2006 compared to 29.5% in the second quarter 2005. This
       increase is primarily caused by higher selling, general and
       administrative expenses related to increased legal spending for
       ongoing litigation. It is anticipated that an elevated level of legal
       expense will continue for the remainder of 2006. Excluding the
       effects of SFAS No. 123(R), operating expense would have been $17.9
       million versus $18.8 million, a decrease of $0.9 million or 4.9%.

   --  Net income for the second quarter 2006 was $4.4 million, or $0.19 per
       fully diluted share, as compared to $4.7 million or $0.20 per fully
       diluted share in the second quarter 2005. Excluding the effects of
       SFAS No. 123(R), net income for the second quarter of 2006 would have
       been approximately $5.1 million or $0.22 per fully diluted share, an
       increase of $0.7 million or $0.03 per fully diluted share.

   --  The Data Capture and Collection business segment grew 30.5% to
       approximately $51.1 million as compared to the second quarter of
       2005, reflecting continued strength in the Channel and in reverse
       vending applications. The Optical Systems business was also quite
       strong, with growth of 47.2% as compared to the second quarter of
       2005.

   --  On a geographic basis, sales in the EMEA (Europe, Middle East,
       Africa) region increased by 53.3% to approximately $29.7 million,
       fueled by new and follow-on orders received from Tier 1 retailers and
       for reverse vending applications. The Asia/Pacific region grew at
       19.3% to approximately $7.2 million. The Americas region experienced
       continued growth in sales, up 10.6% to approximately $25.6 million,
       reflecting solid strength in the Optical Systems business.

  First Half 2006 Results


Revenue for the first six months of 2006 was approximately $122.8 million, an increase of 28.6% as compared to revenue of $95.5 million in the first half of 2005. Net income for the first half of 2006 increased 2.5% to approximately $8.8 million, or $0.38 per fully diluted share, as compared to $8.6 million or $0.37 per fully diluted share in the first half of 2005. Excluding the effects of SFAS No. 123(R), which was not in effect during the comparable period in 2005, net income for the first half of 2006 would have been approximately $10.5 million or $0.45 per fully diluted share.

Please refer to the reconciliation of GAAP results to non-GAAP results included with the financial statements in this release. The non-GAAP data is intended to provide investors with a more complete understanding of our financial results but must be used in conjunction with our GAAP results and not on a stand-alone basis.

2006 Full Year Outlook Confirmed

Metrologic also confirmed its prior guidance for the full year 2006. Revenue is expected within a range of $245.0 million to $255.0 million. The Company expects gross margin to be in the range of 40.0% to 42.0% for the year, with the expectation that wide variances may occur quarter to quarter due to product mix, business segment contribution and other factors. Net income for 2006 will be impacted by discretionary spending associated with our previously announced strategic initiatives and is expected to be $19.0 million to $21.0 million, or $0.82 to $0.91 per fully diluted share, including the estimated annual compensation expense for options issued and outstanding as of June 30, 2006 in accordance with SFAS No. 123(R).  Excluding the effects of SFAS No. 123(R), net income is expected to be $22.0 million to $24.0 million, or $0.95 to $1.03 per fully diluted share. SFAS No. 123(R) became effective for Metrologic as of January 1, 2006. Other factors to consider include an assumed rate for the Euro of $1.20 to $1.25 to the US Dollar and an effective annual tax rate of 36%. These statements do not consider the effect of any acquisitions, dispositions, the future results of litigation or other significant Company events that may take place during the year.

Conference Call Information

The Company will host a conference call for investors on Wednesday, July 26 at 8:30 AM ET. The dial-in numbers for the teleconference are: [phone] (Domestic/Canada) or [phone] (International). Those interested in participating in the conference call should dial in at least 10 minutes prior to commencement of the call. The audio for the conference call will also be available as an audio web cast that can be accessed through the Metrologic web site at http://www.metrologic.com/ by clicking on the banner and following the instructions. Also available through our web site will be a graphical presentation that will be referred to throughout the conference call. The graphical presentation will be available for download and printing approximately 30 minutes before the start of the conference call.

About Metrologic

Metrologic Instruments, Inc. ("Metrologic" or the "Company") is a global supplier of choice for data capture and collection hardware, optical solutions, and image processing software.  Metrologic has been delivering innovative, quality products that are cost effective, reliable and supported by a superior level of personal service for nearly 40 years.  Metrologic products are sold worldwide through Metrologic's sales, service and distribution offices located in The Americas, EMEA and Asia/Pacific. Metrologic provides its customers not only with a great deal, but a great deal more.  For more information please call 1-800-667-8400 or visit http://www.metrologic.com/.

Forward-Looking Statements

Forward-looking statements contained in this release are highly dependent upon a variety of important factors which could cause actual results to differ materially from those reflected in such forward looking statements. Specifically, the factors that could cause actual results to differ from expectations include: the timing, introduction and market acceptance of Metrologic's new products; foreign currency fluctuations with the US dollar; pricing pressures; competitive factors; sales cycles of Metrologic's products; Metrologic's ability to control manufacturing and operating costs as well as product and revenue mix which affect future profitability; the effect of current and pending legislation on the Company's effective annual tax rate; technological changes in the data capture industry, including the adoption of imaging-based and RFID technologies; availability of patent protection for Metrologic's vision-based technologies, and other products; the results of litigation; general economic conditions; and the potential impact of terrorism, international hostilities and natural disasters.  When used in this release and documents referenced, the words "believes," "expects," "may," "should," "seeks," or "anticipates," and similar expressions as they relate to Metrologic or its management are intended to identify such forward-looking statements. We undertake no obligation to correct or update any forward- looking statements, whether as a result of new information, future events or otherwise. For additional factors, please see Metrologic's reports filed with the Securities and Exchange Commission.

                       Metrologic Instruments, Inc.
             Condensed Consolidated Statements of Operations
              (amounts in thousands, except per share data)

                            Three Months Ended        Six Months Ended
                                 June 30,                 June 30,
                                            (Unaudited)
                             2006        2005         2006        2005
                             ----        ----         ----        ----

  Sales                     $62,551     $48,604     $122,786     $95,455
  Cost of sales              37,337      27,044       73,746      53,777
                          ----------------------   ----------------------
  Gross profit               25,214      21,560       49,040      41,678
  Selling, general and
   administrative expenses   16,032      12,139       30,819      23,534
  Research and development
   expenses                   2,763       2,218        5,249       4,170
                          ----------------------   ----------------------
  Operating income            6,419       7,203       12,972      13,974
  Net interest income           377         112          246         134
  Other income/(expense)         95         (45)         485        (742)
                          ----------------------   ----------------------
  Income before income tax
   expense                    6,891       7,270       13,703      13,366
  Income tax expense          2,481       2,617        4,933       4,812
                          ----------------------   ----------------------
  Net income                 $4,410      $4,653       $8,770      $8,554
                          ======================   ======================

  Earnings per share:
    Basic                     $0.19       $0.21        $0.39       $0.39
    Diluted                   $0.19       $0.20        $0.38       $0.37
  Weighted average number of
   common shares outstanding:
    Basic                    22,669      22,136       22,550      22,022
    Diluted                  23,237      23,076       23,221      23,100



                       Metrologic Instruments, Inc.
                  Condensed Consolidated Balance Sheets
                        (all amounts in thousands)

                                               June 30,    December 31,
                                                 2006          2005*
                                                 ----          -----
                                              (Unaudited)
  Cash and cash equivalents                     $40,138       $49,463
  Marketable securities                          25,599        24,475
  Accounts receivable, net                       49,583        48,462
  Inventories, net                               35,682        29,364
  Other current assets                            5,344         6,400
                                                -------       -------
    Total current assets                        156,346       158,164
  Property, plant and equipment, net             20,873        20,402
  Goodwill and other intangibles, net            43,253        43,103
  Other assets                                    1,634         4,513
                                                -------       -------
      Total assets                             $222,106      $226,182
                                                =======       =======

  Accounts payable and accrued expenses         $26,096       $46,709
  Current portion of debt                        16,572        18,433
  Deferred contract revenue                         981           739
                                                -------       -------
      Total current liabilities                  43,569        65,881
  Debt                                                4             3
  Other liabilities                               2,502             8
  Total shareholders' equity                    175,951       160,290
                                                -------       -------
      Total liabilities and
       shareholders' equity                    $222,106      $226,182
                                                =======       =======

  *Certain prior period amounts have been reclassified to conform to the
   current period presentation



                         Supplemental Sales Data
                          (amounts in thousands)

                                  Three Months Ended
                                       June 30,
                                                           %        %
                                   2006        2005      Total    Growth
                                   ----        ----      -----    ------
  By Geography

  The Americas                    $25,596     $23,149     40.9%    10.6%
  EMEA                             29,713      19,387     47.5%    53.3%
  Asia/Pacific                      7,242       6,068     11.6%    19.3%
                                  -------     -------    ------
                                  $62,551     $48,604    100.0%    28.7%

  By Business Segment
  Data Capture and Collection     $51,059     $39,128     81.6%    30.5%
  Industrial Automation/Optical
   Systems
      Industrial Automation         2,639       3,461      4.2%   -23.8%
      Optical Systems               8,853       6,015     14.2%    47.2%
                                  -------     -------    ------
                                  $62,551     $48,604    100.0%    28.7%


                                   Six Months Ended
                                       June 30,
                                                           %        %
                                   2006        2005      Total    Growth
                                   ----        ----      -----    ------
  By Geography

  The Americas                    $53,541     $45,766     43.6%    17.0%
  EMEA                             56,825      38,253     46.3%    48.6%
  Asia/Pacific                     12,420      11,436     10.1%     8.6%
                                 --------     -------    ------
                                 $122,786     $95,455    100.0%    28.6%

  By Business Segment
  Data Capture and Collection    $101,329     $75,656     82.5%    33.9%
  Industrial Automation/Optical
   Systems
      Industrial Automation         5,122       8,015      4.2%   -36.1%
      Optical Systems              16,335      11,784     13.3%    38.6%
                                 --------     -------    ------
                                 $122,786     $95,455    100.0%    28.6%



                       Metrologic Instruments, Inc.
             Condensed Consolidated Statements of Operations
                       Non-GAAP Financial Measures
              (amounts in thousands, except per share data)

                         Three Months Ended           Six Months Ended
                            June 30, 2006              June 30, 2006

                      Actual    Effect  Actual     Actual    Effect  Actual
                      Before      of      as       Before      of      as
                       SFAS      SFAS  Reported     SFAS      SFAS  Reported
                      123(R)    123(R) --------    123(R)    123(R) --------
                      ------    ------             ------    ------
                                      (Unaudited)
  Sales              $62,551       $0  $62,551   $122,786       $0  $122,786
  Cost of sales       37,120      217   37,337     73,208      538    73,746
                     -------    ------ -------    -------    ------  -------
  Gross profit        25,431     (217)  25,214     49,578     (538)   49,040
  Selling, general
   and administrative
   expenses           15,370      662   16,032     29,226    1,593    30,819
  Research and
   development
   expenses            2,545      218    2,763      4,739      510     5,249
                     -------    ------ -------    -------    ------  -------
  Operating income     7,516   (1,097)   6,419     15,613   (2,641)   12,972
  Net interest income    377        0      377        246        0       246
  Other income            95        0       95        485        0       485
                     -------    ------ -------    -------    ------  -------
  Income before income
   tax expense         7,988   (1,097)   6,891     16,344   (2,641)   13,703
  Income tax expense/
   (benefit)           2,876     (395)   2,481      5,884     (951)    4,933
                     -------    ------ -------    -------    ------  -------
  Net income          $5,112    $(702)  $4,410    $10,460  $(1,690)   $8,770
                     =======    ====== =======    =======    ======  =======

  Earnings per share:
    Basic              $0.23   $(0.04)   $0.19      $0.46   $(0.07)    $0.39
    Diluted            $0.22   $(0.03)   $0.19      $0.45   $(0.07)    $0.38
  Weighted average
   number of common
   shares outstanding:
    Basic             22,669            22,669     22,550             22,550
    Diluted           23,237            23,237     23,221             23,221


DATASOURCE: Metrologic Instruments, Inc.



CONTACT:  Ann Anthony, Director, Investor Relations of Metrologic

Instruments, Inc., [phone], ext. 5507, or 



Web site:  http://www.metrologic.com/ 

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